The new week has begun much like last week ended, with rising rates helping to extend the dollar's recent gains. The US 10-year yield is flirting with the 3.0% threshold. The two-year yield is firmer, and, like in the second half of last week, the US curve is becoming a little less flat.  

The market, as we had anticipated, was not so impressed with North Korea's measures, and Korea's Kospi edged lowed, and the region-leading KOSDAQ fell a little more than 1% (still up 10% year-to-date). Foreign investors sold $400 mln of Korean shares today. The amount is large in this context, and foreign investors had only sold $100 mln this month coming before today and $1.1 bln year-to-date.  

The MSCI Asia Pacific Index fell 0.5%, extending the pre-weekend nearly 1% decline to slip below the 20-day moving average. European markets are mostly heavier too. The Dow Jones Stoxx 600 is off 0.2%, lead by utilities (rate sensitive), real estate and consumer staples. This is a big week for bank earnings, and the financial component of the index is flat-to-firmer. US shares are trading fractionally weaker.  

The main economic news has come in the form of the flash PMI readings. Japan's April manufacturing April PMI edged higher to 53.3 from 53.1 in March.  It is the first increase since January. The eurozone flash composite was unchanged at 55.2, reflecting a small increase in services offsetting a somewhat larger decline in manufacturing. The flash manufacturing PMI fell to 56.0 from 56.6 and the services PMI is at 55.0 rather than 54.9.

We suspect three forces are at work behind the apparently stalled momentum in the eurozone this year. First, Q4 likely overstated the growth, so call this reversion to mean. Second, the poor weather dampened activity in Q1, so this should fade. Third, the eurozone economy is entering the latter part of the expansion cycle. The first two forces may be more evident than the third.